Korea ( South & North ) 01 (May 08 - Nov 10)

[winston]

I Just Toured the World's Largest Construction Site By Tom Dyson

As I stood at the top of a 25-story skyscraper and surveyed the land around me, all I could see was construction.

I toured Korea's new free trade zone near Seoul. The authorities in charge of this site claim it's the largest real estate development project in mankind's history. It's called the Incheon Free Economic Zone (IFEZ for short).

A free trade zone is an area with special tax and land privileges. Governments create free trade zones to stimulate business activity. Last week, I told you about China's first free trade zone: Shenzhen.

Twenty years ago, Shenzhen was just a fishing village. Today it's one of China's most powerful manufacturing cities.

These days, many Asian countries are following China's lead... They're using free trade zones to create wealth.

"The hospital will be there," said the guide, pointing to a piece of barren land. "That's an international school. Those bulldozers are building the Jack Nicklaus golf course. Over here we're building a technology park. And over there we'll have one of the world's largest container ports..."

The guide also showed me a scale model of the development. It's one of those models with buttons in the front. When you push a button, one area rises above all the others and a light shines on it. Then a recording plays. It tells you about the buildings that'll go up, what niche industry they'll serve, and what year the project will be finished.

The scale model was as long as a bowling lane. It must have cost several hundred thousand dollars to make.

IFEZ construction started six years ago. The convention center, the international school, two universities, the world's second busiest cargo airport, and the 11th busiest passenger airport have already been built. And the seven-mile bridge connecting the airport with IFEZ's business area is almost finished. (The airport is on an island.)

Over the next 12 years, Korea will build apartment buildings for 250,000 people in IFEZ. It'll construct the world's second-tallest skyscraper. Car companies GM and Daewoo are building a major research center and test track. Korea wants to lead the world in robotics. It's making "robot land" in one corner of IFEZ.

IFEZ will be a "business utopia" for international companies. The government will give you free land and major tax breaks if you locate your business there. IFEZ is at the center of Asia. China's industrial East Coast is just 200 miles away. Business centers in Hong Kong, Taiwan, and Japan are close, too. And English is the official language.

I haven't found any direct ways to invest in IFEZ. The companies involved so far are all huge multinational corporations. I wouldn't buy residential property in IFEZ either. I saw one basic three-bedroom apartment there. It was on the fourth floor. My host said it would sell for $600,000. That's more expensive than an equivalent apartment in downtown Seoul. He also told me the Koreans are rushing to buy apartments that haven't been built yet... another mark of an expensive property market.

IFEZ is an ambitious project. To pull it off, Korea will need the world's biggest companies to invest billions of dollars. Money is tight right now... especially in the United States, though I think the U.S. will still commit in the long run.

But that's not the point here... This project tells me Korea wants to dominate the business world. It's aggressive, almost militant capitalism. And that makes me want to invest in Korean stocks.

[winston]

BUY OR SELL-South Korea stocks: Falling sword or bargain?

SEOUL/SINGAPORE, Sept 3 (Reuters) - South Korea's financial turmoil has been stoked by fears foreign investors are set to stampede out of the country. [ID:nSEO158653]

The stocks, rattled by worries about its external debt and a weakening economy, have fallen nearly 5 percent in the past week. [ID:nSEO134877]

Should investors continue to bail, or is now the time to snap up some bargains?

HORROR-STRICKEN

Thomas Inho Choi, Head of Equities, UBS Hana Asset Management Co Ltd, SEOUL

"The market's bottom is not in sight now. Global credit and recession worries, combined with domestic issues have prompted panic selling by horror-stricken investors.

"We are seeing even the slightest negatives pounding on markets nowdays. And the market's current downturn will probably continue until we see major positive developments in financial markets or in macroeconomic landscape. Meanwhile, extreme volatility in the domestic foreign exchange markets is one of major domestic negatives."

Daphne Roth, Head of Equity Research, ABN AMRO, SINGAPORE

"All the things with the new government, all the policies that could boost domestic demand has actually not materialised. We are extremely bearish on the construction sector, so we have an underweight there."

"The cyclical nature of the Korean economy and its dependence on the U.S. economy makes it more vulnerable to a global slowdown, but a sliding won <KRW=> could favour tech exporters."

CRISIS CONCERNS UNWARRANTED

Pearlyn Wong, investment analyst, Julius Baer, SINGAPORE

"We feel that the currency is attractive at these levels and the concern in the market about a financial crisis is unwarranted given the strength of the foreign reserves, the fiscal strength of the economy.

"Also, we feel that valuations are attractive, relative to its own history and to the region. We prefer stocks which have sustainable profit growth such as the tobacco sector. We also like the education sector, and the solar sector from a longer term perspective."

South Korea is trading at about 10.8 times forecast earnings for 2008, versus 12.4 times for emerging Asia, according to MSCI.

Kim Hag-ju, Head of Equity Research, Samsung Securities, SEOUL

"We feel that most negatives have already been factored in markets through latest sharp falls.

"There are only handful of firms who are vulnerable to such liquidity problems, and the majority of more significant South Korean firms are financially sound, meaning stock markets are exposed to limited systematic risks.

"I'd say South Korea's most competitive sectors in techs, most namely the handset and memory chip makers will do well after hitting bottom in the fourth quarter this year. Automakers will also be good bets as they are seen growing more competitively in both domestic and overseas markets."

[millionairemind]

I sit up and take notice when I hear IMF doing such dismissals... No wind where got waves?

I remember the last time back in 97, just 3 months before the Thai Baht got attacked and devalued, IMF was openly saying that the Thai economy was sound...

Wednesday September 3, 5:07 PM
IMF dismisses fears of second SKorean fiscal crisis

The International Monetary Fund on Wednesday dismissed fears of a second financial crisis in South Korea, saying the country's fundamentals are much stronger than in 1997.

Financial markets have been spooked by concerns of possible massive capital flight this month, when bonds worth 6.71 billion dollars held by foreigners mature.

The Korean won closed Wednesday at 1,148.5 to the dollar, down 14.5 won from Tuesday and the lowest level since October 2004.

The IMF said some parallels had been drawn to 1997 given the rising external debt, a weakening currency and the current account moving into deficit.

"It is important to emphasise that these similarities are largely superficial, and the fundamentals of Korea today are much stronger than 10 years ago," said the IMF's resident representative Meral Karasulu.

She said much of the short-term foreign debt was linked to currency hedging by Korean exporters and investors abroad.

"Furthermore, despite the recent increase, the outstanding external debt is still not unusually large when compared to Korea's export earnings or international reserves, or when compared to other countries in the region."

Seoul officials also say there is no comparison to 1997, when the IMF made its biggest ever bailout of 57 billion dollars to help rescue the nation from state bankruptcy.

They say foreign exchange reserves of some 243.2 billion dollars are enough to meet liabilities.

"Such (crisis) talk is no more than wild rumours," Prime Minister Han Seung-Soo told reporters. "No one in the government believes what we are experiencing now is similar to the International Monetary Fund crisis of 1997."

Karasulu said that in the last decade Korea's corporate sector had deleveraged significantly and was profitable, while banks had high levels of capital and low levels of non-performing assets.

"Financial supervision has been strengthened significantly. And Korea operates under a flexible exchange rate system," she said.

Karasulu said the "modest" current account deficit and weakening won largely reflect "challenging global circumstances" and high oil prices.

"This is very different from 1997, when the driving factor behind the deterioration of the current account was a badly misaligned currency."

Stocks rebounded Wednesday from an 18-month low as investors snapped up brokerage and construction shares despite the concerns over financial instability.

The KOSPI index rose 19.75 points, or 1.4 percent, to 1,426.89.

Deputy Minister for International Affairs Shin Je-Yoon said local financial markets would stabilise after 6.7 billion dollars worth of won-denominated bonds held by foreigners matures next week.

"Our foreign reserves are sufficient to cover" short-term foreign debt and local banks have enough liquidity, he said.

Shin said the government expects foreigners to re-invest in domestic treasuries after their bond holdings mature in September.

"We already have funds procured to amortise Korean treasuries maturing in September."

[winston]

South Korea set to weaken further By Young Sun Kwon

Published: September 1 2008 17:08 | Last updated: September 1 2008 17:08

South Korea’s economy looks set to weaken further, while inflation should remain high – although there is plenty of scope for macroeconomic policy to respond to weaker growth believes Young Sun Kwon, economist at Lehman Brothers.

“While the economy is enjoying its longest uninterrupted period of expansion – 21 quarters – since 1992, the pace of growth has started to moderate this year as weaker domestic demand offsets solid exports,” he says.

Lehman expects economic growth to slow from 5 per cent in 2007 to 4.1 per cent in 2008 before rebounding to 4.4 per cent next year. It also sees consumer price inflation staying above the Bank of Korea’s target range of 2.5-3.5 per cent this year, mainly due to higher oil prices and a weaker currency.

But Mr Kwon believes that with oil prices falling, inflation should ease back to within target by 2009.

He says: “With Korea having the largest budget surplus in its history [3.8 per cent of GDP in 2007] and low public debt [32 per cent of GDP], the government is embarking on an expansionary fiscal policy in response to the slowing economy.”

Mr Kwon notes that monetary tightening has resumed, with the BoK raising rates by 25bp to 5.25 per cent last month in an attempt to keep inflation expectations at bay.

“But, given our outlook for continued slower growth and for CPI inflation to abate next year, we look for 75bp of rate cuts in 2009.”

http://www.ft.com/cms/s/0/1cc6267e-783f ... fd18c.html

[ishak]

S Korea Aug consumer sentiment rebounds from July
Reuters, 08 Sep 2008

South Korea's consumer sentiment index in August rose for the first time in eight months from a 7-1/2-year low in July, but still shows that most respondents in the survey released on Monday are pessimistic about the economy.

The seasonally adjusted consumer expectation index rose to 93.3 in August from 85.9 in July, the National Statistical Office said in a statement released on Monday.

It was the first rise in the index since December 2007.

The sentiment index measures how South Koreans feel about their economic prospects and personal spending over the next six months. A reading below 100 indicates most consumers are pessimistic.

The figures were published ahead of a central bank review of interest rates on Thursday.

The Bank of Korea raised the borrowing costs to a 7-1/2-year high last month for the first time in a year to contain inflation expectations.

The National Statistical Office's consumer expectation index is closely watched as a gauge of domestic demand, which accounts for more than half of the country's gross domestic product. -- REUTERS

[millionairemind]

Things have come full circle...

South Korea Turns Tables on Wall Street a Decade After Bailout

By Bomi Lim

Sept. 16 (Bloomberg) -- In 1999, Kim Jung Yul sat at a table negotiating the sale of Korea First Bank to San Francisco-based Newbridge Capital LLC as it sought cash to stay afloat during the Asian financial crisis. Nine years later, he's scouting for a Korean buyer for a U.S. bank.

``I was determined to squeeze one more dollar out of them,'' said Kim, recalling four months of talks in Seoul as the state- run company he worked for sold its controlling stake. ``Now, it's U.S. institutions that desperately need capital.''

Kim's new role, working as a consultant for a bank he declines to identify, underscores the resurgence of the financial industry in a nation that a decade ago was bailed out by the International Monetary Fund. As banking writedowns from the implosion of the U.S. mortgage market swelled past $510 billion, Merrill Lynch & Co. has received cash from South Korean investors and Lehman Brothers Holdings Inc. held unsuccessful talks about selling a stake to state-owned Korea Development Bank.

Korean investors are seeking to use cash and expertise amassed as they emerged from the country's debt crisis to hunt for bargains among U.S. banks. Even so, they're encountering resistance from Wall Street firms unwilling, like Kim in 1999, to sell out too cheaply.

KDB's talks with New York-based Lehman stalled last week because of disagreements over price, as did Korea Asset Management Corp.'s bid to buy bad loans from Merrill.

Lehman yesterday filed for Chapter 11 bankruptcy protection after failing to find a buyer. Bank of America Corp., the biggest U.S. consumer bank, agreed to acquire Merrill Lynch & Co., the third-biggest U.S. securities firm by market value, for about $50 billion in stock.

`Buyer's Market'

``The tables have turned, and U.S. banks have to realize that,'' said Lee Chol Hwi, chief executive officer of state-run Korea Asset Management Corp., known as Kamco, who was trying to buy $200 million of nonperforming loans from Merrill. ``It's practically a buyer's market there.''

Kamco, which helped liquidate distressed assets in South Korea after the 1997 to 1998 financial crisis, is seeking to buy as much as 1 trillion won ($904 million) of bad loans in the U.S. CEO Lee says there are plenty of U.S. companies seeking Korean money. Fund managers, companies and even state governors in the U.S. have requested a few minutes of his time during a trip he's planning there later this month, Lee said.

``That was unthinkable in the past,'' he said.

Banking Overhaul

South Korea's economy shrank 6.9 percent in 1998, during the worst recession since the Korean War ended in 1953, prompting citizens to turn over $2.2 billion of gold to the treasury as the crisis pushed the country to the brink of a sovereign default.

During the banking overhaul that followed, the government allowed more than 630 financial companies to fail and sold two of the biggest lenders to overseas investors. Korea also began building its foreign exchange holdings to prevent another crisis. Its foreign currency reserves swelled from $8.9 billion at the end of 1997 to $243.2 billion on Aug. 31, the sixth-largest in the world, as exports of ships, cars and electronic goods rose.

``Korea's financial industry has made remarkable progress over the past 10 years,'' said Chung Duck Koo, who led the South Korean delegation to talks with the IMF in late 1997, resulting in a $57 billion bailout. Today's credit market turmoil ``sets the stage for Korean financial firms to go global.''

Expansion Plans

Min Euoo Sung, the former Lehman executive who took the helm at Korea Development Bank in June, said last week that he plans to make it Asia's third-largest bank within five years. The government plans to sell the lender to the public next year.

South Korea has already flexed its financial muscles. Korea Investment Corp., the $30 billion sovereign wealth fund known as KIC, invested $2 billion in New York-based Merrill in January. Hana Bank, Korea's fourth-biggest, bought a $50 million stake in Merrill in February.

Merrill plunged more than 60 percent in the year to Sept. 12 in New York Stock Exchange composite trading. Bank of America will pay $29 a share in stock, 70 percent more than the Sept. 12 closing price, for Merrill.

South Korean firms have invested about $720 million in securities linked to Lehman, the country's financial regulator said in a statement released yesterday.

Chin Young Wook, KIC's chief executive officer, said July 29 the fund will approach future U.S. deals ``carefully.''

KIC's investment in Wall Street is smaller than Singapore's Temasek Holdings Pte, which invested more than $5 billion in Merrill, and China Investment Corp., which put $8 billion into Morgan Stanley and Blackstone Group LP during the past year. Morgan Stanley is the second-largest U.S. securities firm and Blackstone manages the biggest leveraged buyout fund. Both are based in New York.

Regional Challengers

``Korea faces challenges from other players in the region like Temasek who have much more expertise in making such cross- border investments,'' says Kim Ja Bonn, a researcher at the Korea Institute of Finance in Seoul. ``It's important to seize a chance when it comes, while accurately assessing the deal.''

Jun Kwang Woo, chairman of the Financial Services Commission, has cautioned Korean firms about the risks of buying U.S. banks twice in the past month.

The regulator's warning comes as Korea's economy stutters. Inflation is at a 10-year high and the won has slumped 19 percent this year against the dollar, making it the worst-performing Asian currency.

That hasn't damped enthusiasm among South Korean investors, said Kim, 51, who started DW Consulting in 2004 and advised Seoul-based LIG Insurance Co. on the sale of its life insurance affiliate to Seoul-based Woori Finance Holdings Co. and London- based Aviva Plc, the U.K.'s biggest insurer, earlier this year.

``This is the chance of a lifetime for Korean companies to enter the U.S. market,'' said Kim, who was an official at state- run Korea Deposit Insurance Corp. when it sold a controlling stake in Korea First Bank to Newbridge. The buyout firm made a $1 billion profit selling its interest to London-based Standard Chartered Plc in 2005.

``We were naive back then,'' Kim said. ``We paid a high price to learn from the crisis, and it's time to put what we've learned to use.''

[winston]

Korea was down > 5% in the morning. It came back and closed -0.5%. Amazing recovery...

Also, they have banned short-selling until the end of the year.

Am still concerned that their exports to the US would be affected..

[winston]

Pension fund says US firm to invest US$3b in SKorea

South Korea's state pension fund said a US investment firm has agreed in principle to invest US$3 billion (HK$23.4 billion) in the country, a move that could ease pressure on the local won.

Oaktree Capital Management will invest the money, while the National Pension Service will invest an equal amount in the local currency, said Kim Moon-Soo, senior investment officer at the pension fund.

The fund said that Oaktree's investment will help ease the local foreign currency shortage, which drove down the won to a 10-year low against the dollar.

AGENCE FRANCE-PRESSE

[helios]

Called some Korea companies in semiconductor, chemicals, engineering, automotive companies today ...

these companies are struggling in the backdrop of closing/ sizing down their businesses ...

[kennynah]

u mean, u called them and just ask them ..."hello, how is your business?" is it? wah....u the can sister...